Bond markets across geographies are experiencing their worst streak as inflationary pressure reminds investors of the mortality of easy money. According to Bloomberg, the global bond index is down 11 percent from its peak in January, which roughly translates to a whopping $2.6 trillion capital loss for bond investors.
The most tracked US 10-year benchmark treasury yield has climbed 10 basis points in the past one month and the yield on German bunds has climbed out of negative territory. One basis point is one hundredth of a percentage point.
Bond yields from Japan to Australia have all risen in the past month, wiping out capital gains of investors. Note that bond yields move inversely to prices. In this rout, India’s bonds have not been left behind. At the same time, the damage in the domestic market has been rather mild. The 10-year benchmark government bond yield has climbed about 8 basis points in the past one month. Here’s a look three key reasons that limit the rise in domestic bond yields.